Look, it’s really this simple: Anything that can’t go on forever, won’t.
This week gold and silver were pushed below their previous “higher low”; gold dropped below its 1240 support, and silver was forced below 18.70. From a technical chart perspective, this has just invalidated the uptrend for PMs in 2014, which will probably bring on more selling pressure for PMs.
Is a big drop coming on tonight’s Asian open?
For close to 300 years, inflation in the US remained very subdued. Small spurts occurred around major wars (Revolutionary, Civil, WW1, etc), but after each, inflation quickly trended back down to its long-term baseline. If you lived during this stretch of time, your money had roughly the same purchasing power your great-grandfather’s did.
But something changed after inflation spiked yet again during World War 2. With the permanent mobilization of the military industrial complex and the start of the decades-long Cold War, combined with a related acceleration in government deficit spending, inflation did not come back down. It remained elevated, and in fact, rose further.
That is, until the “Nixon shock” in 1971, when the dollar’s remaining ties to gold were severed. Then inflation EXPLODED. And the inflationary moon-shot has continued since, up to present day.
Kirk Sorenson returns this week to relay what has happened in the thorium space.
The East, most notably China, is now fully-mobilized around getting its first reactor operational by as soon as 2020. If indeed thorium reactors are as successful as hoped, the US will find itself playing catch up against countries who suddenly hold a tremendous technology advantage:
The current bubbles in financial assets — in equities and bonds of all grades and quality — raging in every major market across the globe are no accident. They are a deliberate creation. The intentional results of policy.
Therefore, when they burst, we shouldn’t regard the resulting damage as some freak act of nature or other such outcome outside of our control. To reiterate, the carnage will be the very predictable result of some terribly shortsighted decision-making and defective logic.
Blame can and should be laid where it belongs: with the central banks.
In danger of dying from too much debt.
Today, the world economy is in uncharted territory.
Never before has the developed world carried this much debt.
Never before have the central banks of those same countries expanded their balance sheets so much.
Never before has so much sovereign debt been outright monetized. Never before have major financial institutions been officially designated as “too big to fail” and thereby been granted special license to assume gigantic risks.
Dr. Lacy Hunt, economist and current executive vice president of Hoisington Investment Management Company, expects the macroeconomic situation to get worse from here:
This week gold joined silver in breaking down, setting a new cycle low, and selling off relatively hard. Miners followed.
Gold joined silver in the general PM move lower this week, breaking down below all three of its moving averages on high volume. Trader Dan last week opined that gold was likely only holding up because of international concerns, and would probably move down to test 1280 if things calmed down. It looks like his assessment was accurate.
Thursday’s break below 1280 confirmed a pattern of lower highs in gold. That’s bearish.
Silver’s overall price action today was that of a failed rally; at one point silver was up +0.20 but failed to hold its gains, which I consider generally bearish.
Silver’s downtrend remains intact, and gold is now starting to give way as well, having dropped 4 days in a row.
Putin plays chess, the “markets” play Tic-Tac-Toe.
The US is clearly now pushing Russia towards war. But if you read the signs correctly, Russia has been preparing for exactly this outcome for many years.
Out of several reasons that US power brokers specifically — but western power brokers more generally — are deeply unhappy with Russia right now is that Russia is committing a cardinal sin: it is openly, brazenly calling for an end to dollar dominance and has moved aggressively with China to achieve that aim.
No oil-rich country that has tried to move away from the dollar in the past twenty years has managed to do so without being attacked by the US, suffering a regime change, or being ruined by sanctions. In some cases, all three.
Not only has Russia managed to secure a string of heavy-duty bilateral trade and currency swap agreements over the past year, but they’ve done so despite ever-increasing threats and responses from the US and its allies.
And frighteningly, the equity markets in the West are completely ignoring the nested set of risks that accompany these moves and countermoves by two geopolitical heavyweights, which range from punishing trade wars (already underway), to electronic warfare, to an actual shooting war.
Let’s pull back for a moment and look at the Really Big Picture:
We’re facing a future in which the economic growth the world has enjoyed over the past century can no longer continue.
Massive changes to our way of life are in store. No matter where each of us lives.
As the MUCH WATCH video update to the original Crash Course (viewed by over 15 million people) from our friends at Peak Prosperity shows,
The Next 20 Years Will Be Completely Unlike the Last 20:
The next crisis is going to be bigger than the Fed. It is like they build a five foot sea wall and here comes a forty foot tsunami. There is only one clean balance sheet left in the world and that is the IMF. So the only way you are only going to reliquify the world in the next liquidity crisis is by the IMF printing their world money, these Special Drawing Rights or SDRs, and that is going to be the end of the dollar as a global reserve currency.
The problem with the US is that the Treasury and the White House want a weak dollar.
I mean, what good does it do you when your own country wants to trash the currency? What happened to the strong dollar policy? It’s over now and we’re in the currency wars. That is going to lead to a collapse and ultimately we are going to see either gold or the SDRs the new store of value on a worldwide basis.
“In the rest of the world and particularly Asia, people do not think like we do. As far as they’re concerned, gold is the only long term asset worth holding. It is the family pension fund… the financial press in the West, the mainstream media, basically rely for their information on analysts in the bullion banks. And the bullion banks are always short… Now whether the West is right or wrong is not the point. The point is there are 4 billion people in Asia who have got a very old-fashioned view of gold, and they have become wealthy over the last twenty years. And their view is likely to prevail against the <1 billion of us in North America and Western Europe. I mean it really is as simple as that. It’s not a question of Austrian economics, or Keynesian, or whatever. We’re outnumbered.“
Chris Martenson has prepared for SD readers his mammoth annual report on the fundamental reasons for owning gold. The plethora of systemic risks that make gold a wise investment continue to expand, as does the shocking imbalance between increasing demand and tightening supply.
The punch line is this: Gold (and silver) is not in bubble territory, and its largest gains remain yet to be realized; especially if current monetary, fiscal, and fundamental supply-and-demand trends remain in play.
We approaching a moment in the great transfer of wealth where the dividing line between safety and ruin may quite simply come down to this one question: Got gold?
Our lead story: JP Morgan Chase, the largest bank in the US by assets is reducing its headcount for 2014. The bank announced the changes, saying that creating a business model that can deal with new regulation is cutting into the firm’s profits. JP Morgan said it expects its total headcount to fall by 5,000 to 260,000 people. But JP Morgan is confident that it can win in this new environment… by replacing humans with machines. Erin explains.
Then we welcome Chris Martenson of Peakprosperity.com to give his thoughts on the Federal Reserve and the weak fundamentals of the US economy. In the first segment, Martenson discusses the effect of the huge flood of liquidity created by the Fed on the market. He also explains why bond prices can go up as a result of the Fed’s quantitative easing. After the break, Martenson describes why quantitative easing has helped equity prices but hasn’t helped the underlying economy, and talks about what is happening with inflation in the economy.
In this MUST LISTEN interview with Peak Prosperity’s Chris Martenson, James Turk discusses why he believes the time we live in now will be studied by future historians for generations to come. Just as we today marvel at the collective madness that resulted in the South Sea and Dutch tulip manias, our age will be known as the era when society lost sight of what money really is.
And as result, the wrong kinds of wealth — today, that’s mostly financial assets — are valued and pursued. And just like those bubbles from centuries ago, when the current asset boom goes bust, the value of paper wealth will vaporize.